Postal Service could default

The U.S. Postal Service announced Friday that it had racked up a $3.1 billion quarterly loss and that if current trends continue it is likely to default on its payments to the federal government.

The USPS continues to suffer from falling mail volume. During the third quarter this year, USPS delivered a total of 39.8 billion items, a decline of 2.6 percent compared to the 40.9 billion items delivered during the same period last year, the Associated Press reported.

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According to current revenue estimates, the postal service will be unable to make a $5.5 billion payment to its retirement fund that is due in September. Unless Congress takes action, such as waiving the payment, the postal service says that it will have no choice but to default on its payments.

As consumers increasingly rely on electronic communications instead of “snail mail,” the USPS has seen a serious drop off in demand, and it continues to struggle to adjust to the shift that has occurred during the past decade.

“We continue to take aggressive actions to reduce costs and bring the size of our infrastructure into alignment with reduced customer demand,” Postmaster General and CEO Patrick Donahoe said in a statement.

The USPS announced earlier this year that it will identify nearly 3,700 underutilized post offices for closure and that it will shift its services to local retailers who can serve as branch locations without the expense of having to operate a full postal service, a program that is aimed at maintaining access to the post office in rural areas while at the same time cutting spending. The post office is also considering reducing delivery to 5 from 6 days a week, or perhaps even fewer delivery day.

During the past year, the postal service has carried out aggressive cost-cutting measures, reducing work hours for the third quarter by 3.1 percent to 9.2 million hours. The same quarter saw the voluntary retirement of about 1,850 administrative employees.

Still, the prospect of default looms large over the agency, which will soon reach its statutory borrowing limit.

“We are experiencing a severe cash crisis and are unable to continue to maintain the aggressive prepayment schedule that was mandated in the [Postal Accountability and Enhancement Act of 2006]. Without changes in the law, the Postal Service will be unable to make the $5.5 billion mandated prepayment due in September,” CFO and Executive Vice President Joseph Corbett said in a statement.

There are several pieces of legislation pending in Congress that would provide a measure of reform for the agency, but it is unclear whether any immediate action will be taken on those bills.